Invest like a hedge fund honcho with the Top Guru Holdings ETF

There's no doubt that hedge funds have had a tough time beating the broader stock market in recent years, but they've still got an edge over individual investors when it comes to stock picking. And if that's your thing, investing like a hedge fund all-star just got easier.

The Top Guru Holdings Index ETF (GURU), which began trading Tuesday, invests in the single biggest holding of 68 top hedge funds, including John Paulson's Paulson & Co., Bill Ackman's Pershing Square Capital Management, David Tepper's Appaloosa Management, David Einhorn's Greenlight Capital and Daniel Loeb's Third Point.

Since some of the biggest holdings at hedge funds are the same, the fund's overall holdings stand at just 51, and they are all equally-weighted at 1.96%. Technology, financial and industrial stocks make up nearly 55% of the fund, with holdings including Apple (AAPL), Microsoft (MSFT), Google (GOOG), JPMorgan Chase (JPM), AIG (AIG), Sallie Mae owner SLM Corp. (SLM), BHP Billiton (BHP), Lockheed Martin (LMT) and Canadian Pacific Railway (CP).

"The fund allows investors to piggy back on the expertise of the largest hedge fund managers," said Global X Funds CEO Bruno del Ama. "Hedge funds may over or under perform the market based on their overall strategy, but we're boiling down to their best equity ideas with the highest conviction."

According to back testing results, the ETF would have climbed roughly 30% annually during the past three years, beating the S&P 500's (SPX) 22% average yearly gain, according to index provider Structured Solutions, which created the Top Guru Holdings Index specifically for the new ETF.

The holdings are rebalanced after hedge funds file their quarterly 13Fs with the SEC, which requires disclosure of equity holdings for firms with more than $100 million in assets under management.

To avoid the dangers of chasing performance, the ETF only invests in the top picks of hedge funds that have a relatively low portfolio turnover rate and have at least a 5% position in their top holding.

Hibah Yousuf is a reporter at CNNMoney, where she covers stocks, bonds, commodities and currencies trading across the globe, as well as corporate earnings and other markets-related news. Prior to joining the site in 2009, she interned at Money Magazine.